improving the internal control system in hoa hung trading and investment joint stock company

Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
TABLE OF CONTENTS
Chapter 2 21
THE STATE OF INTERNAL CONTROL SYSTEM OF HOA HUNG TRADING AND
INVESTMENT JOINT STOCK COMPANY 21
2.1. CHARACTERISTICS OF ORGANIZATIONS AND ACTIVITIVES OF HOA HUNG
TRADING AND INVESTMENT JOINT STOCK COMPANY WITH INTERNAL
CONTROL PROBLEMS 21
2.1.1. The formation and development of Hoa Hung trading and investment joint stock
Company with internal control problems 21
2.1.2. Production and business activities of Company with Internal Control System 23
2.2. INTERNAL CONTROL SYSTEM AT HOA HUNG TRADING AND INVESTMENT
JOINT STOCK COMPANY CURRENTLY 27
2.2.1. Environmental Control 27
2.2.1.1. Management Characteristic 27
2.2.1.2. Structure 29
2.2.1.4. Planning, estimates and norms 37
2.2.1.5. Internal Audit Division 40
2.2.1.6. The external factors 41
2.2.2. The accounting system and economic information 42
2.2.3. Internal control procedures 48
2.3. REVIEW OF STATE OF INTERNAL CONTROL SYSTEM IN HOA HUNG
TRADING AND INVESTMENT JOINT STOCK COMPANY 56
2.3.1. The results obtained 56
2.3.2. Some restrictions and cause 57
Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
ABBREVIATIONS LIST
Abbreviations Meaning
1 AICPA American Institute of Certified Public Accountants
HR Human resources
3 ICS Internal control system

4 IFAC International Federation of Accountants
Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
TABLE LISTS
Chapter 2 21
THE STATE OF INTERNAL CONTROL SYSTEM OF HOA HUNG TRADING AND
INVESTMENT JOINT STOCK COMPANY 21
2.1. CHARACTERISTICS OF ORGANIZATIONS AND ACTIVITIVES OF HOA HUNG
TRADING AND INVESTMENT JOINT STOCK COMPANY WITH INTERNAL
CONTROL PROBLEMS 21
2.1.1. The formation and development of Hoa Hung trading and investment joint stock
Company with internal control problems 21
2.1.2. Production and business activities of Company with Internal Control System 23
2.2. INTERNAL CONTROL SYSTEM AT HOA HUNG TRADING AND INVESTMENT
JOINT STOCK COMPANY CURRENTLY 27
2.2.1. Environmental Control 27
2.2.1.1. Management Characteristic 27
2.2.1.2. Structure 29
2.2.1.4. Planning, estimates and norms 37
2.2.1.5. Internal Audit Division 40
2.2.1.6. The external factors 41
2.2.2. The accounting system and economic information 42
2.2.3. Internal control procedures 48
2.3. REVIEW OF STATE OF INTERNAL CONTROL SYSTEM IN HOA HUNG
TRADING AND INVESTMENT JOINT STOCK COMPANY 56
2.3.1. The results obtained 56
2.3.2. Some restrictions and cause 57
Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
ACKNOWLEDGMENTS
During this course and complete my thesis, I have received guidance, great assistance
from our teachers, all of people in my class. With respect and grateful I would be deep to

express sincere thanks to:
Faculty Training - International Trade University have created all favorable conditions to
help me in my education background and complete thesis.
All teachers of Commercial University and other foreign experts from Lyon3 University,
most helpful, teach, encourage and create favorable conditions for me during the learning
process to date thesis
Despite great efforts, but my thesis still has mistake, hope to receive sympathy and
suggestions of the teachers in marking thesis council.
Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
EXECUTIVE
I have selected Topic: "Improving the internal control system in Hoa Hung trading
and investment joint stock company ”
Adress: 81 TAM TRINH street – HOANG MAI district.
Telephone: 04.37171977.
Guidance: Nham Anh Hung director.
Mobile: 0932436666.
1. Urgency of the subject
Renovating and improving the efficiency of SOEs in general and limited company in
particular is the policy of the Party has been implemented for many years. In the process of
innovation present, management is one of the subject. It is interested in business, especially
the construction of a system of internal controls effective at the enterprise. Internal control
increasingly made clear roles and positions important to the management business is with
large-scale enterprises.
However we have many point of view about internal control:
1. First Concept: Auditing Guidelines International Council No. 6 was the accounting
Union of Malaysia (Malaysian Assembly of Certificated Public Accountant - MACPA) and
the Institute of Accounting Malaysia (Malaysian Institute of Accountant - MIA) launched as
follows: "The system of internal control structure is combined with the measures and
procedures by the Board of an organization may accept, to support implementation of the
objectives to enhance governance ability to conduct business practices in order and efficiency

include: absolute follow the ways of the Board, protect property, prevent and detect fraud,
mistake, ensuring accuracy , full current account data, timely and reliable financial data and
information. The scope of internal control systems also beyond matters directly related to the
functions of accounting systems. All personal principles of internal control systems as Duo's
operations and systems are understood as internalcontrol."
2. The second Concept: British Accounting Association (England Association of
Accountant - EEA) definition of internal control systems as follows: "A comprehensive
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Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
system of control of financial experience and different areas established by the
ManagementBoardto:
• Conducting business units in order and efficiency;
• Ensuring compliance with the absolute path of Board business;
• Keep your property safe;
• Ensure integrity and accuracy of accounting data, the individual components of the
system of internal control are considered active examination or audit activities. "
3. The third Concept : Institute independent auditing United States (American Institute
of Certificated Public Accountant - AICPA) defines internal control as follows: "Internal
controls include the plan of the organization and all methods of distribution the measurement
and recognition in the business to ensure the safety of their assets, check the compatibility and
reliability of accounting data, enhancing the effectiveness of activities and encourage the
implementation the long-term management policies. "
4. The forth Concept : the Federation of International Accounting (The International
Federation of Accountant - IFAC) is: "The system of internal control is the plan of the entire
unit and methods, the working steps that the comply with corporate governance. Internal
control systems help managers achieve the goals of certainty and order business effectively,
including the respect of the management regulations; keep property safety, prevent detect
errors and fraudulent accounting records complete, accurate financial reporting timely,
reliable. "
5. The fifth Concept: In episode 2 Curriculum Professional Accounting University of

Canada: "The system of internal control is defined as a system of financial rules and
regulations are not financial. This system managed by the enterprise established to manage the
business executive order and efficiency. Ensure respect for all management regulations, keep
safe assets, maintain records accounting regime fully and accurately the financial reporting
deadlines.
So we can conclude all of concepts haves 2 general point:
The first is the internal control systems in an enterprise is understood as two parts: Part
One is the internal control mechanism should include full service mechanisms, processes,
regulations and professional plus an organizational structure (including the arrangement and
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Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
distribution division of assignment, authorization, etc. ) to make the operation of the
enterprise is effective and safe. The second part of the internal control system is the control
and supervision of responsible, including internal audit to ensure that the operation of internal
control mechanisms mentioned above are strictly, there effective.
The second is the internal control system will be attached to every part, every process
and all professional staff in many small businesses will be involved in internal control and
control each other (rather than is only granted on the lower level control).
2. Reasons need to internal control?
In fact, management method of many companies still loose, while smaller companies
operates are the same family- management style, while large companies operates re-
distribution rights for lower level without the fully tested. Both these models are based on
personal trust and the lack of regulation of information, cross-checking between the parts to
prevent fraud. Establish a system of internal control is established a monitoring mechanism
where you do not handle with confidence, but with clear rules to: - Reduce risk of potential
risks in business (errors inadvertently cause damage, slow the risk of the plan, increased costs
and reduced product quality ), - Protect property from damage or loss, loss, fraud, fraud,
theft - Ensure accuracy of accounting data and financial statements, - Make sure all
members comply with company rules and regulations of the law, - Ensure use optimal use of
resources and achieve the set objectives, - Protecting the interests of investors, shareholders

and building trust with them.
3.Scale of the thesis
Surveying Hoa Hung trading and investment joint stock company is business specialize
in investment and consultant production and sales of products with large-scale maps,
characteristics for the whole army in particular, the country generally so the management here
is very difficult complex. Implementation of the policy innovation, recently Surveying Hoa
Hung joint stock company has been actively restructuring the Organization, to strengthen
management focusing to improve the system accounting and economic information, internal
audit as well as regulations and procedures to control the whole company. But in reality
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Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
internal control system here is insufficiency, does not meet the requirements of management.
So perfect conditions internal control system current Hoa Hung trading and investment joint
stock company is necessary in order to improve business efficiency and prestige of the
company.
4. Structure of the thesis:
The purpose of the Subject is a research system of reasoning about internal controling
system. It includes the nature, purpose, and components as well as the role of internal
controling system position of business management. Through practical study and propose
specific solutions to improve internal controling system in Hoa Hung joint stock company
Chapter 1: The basic theoretical problem of internal controling system in the enterprise.
Chapter 2: Status of internal controling system at Hoa Hung trading and investment joint
stock company.
Chapter 3: Orientation and solutions improve internal controling system in Hoa Hung
trading and investment joint stock company.
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Chapter 1
THE FUNDAMENTAL PROBLEMS ON INTERNAL CONTROL
SYSTEM IN BUSINESS

1.1. INTERNAL CONTROL SYSTEM IN THE MANAGEMENT SYSTEM
1.1.1 General Theory on the internal control system
Internal control system is essentially a series of integrated activities, measures, plans,
opinions, rules, policies and efforts of all members of the organization to ensure that
organizational performance, achieve all manner of reason. Can understand simply, internal
control systems is a system of all what an organization needs to do to get or avoid what it wants.
Base on this principle, the management systems of different international standards such as ISO,
TQM, QA / QC to ensure the effective operation of an organization that has been built.
1.1.1.1. General theory of control in management.
In relation to organizational structure, management has an impact on the organization,
with the aim use the most effective of resources to achieve identified goals set. The subject
here is the management structure of the unit, including leading cadres at all levels and
department of professional staffs who implement management and administration units.
Object management is people and things, the phenomenon occurred in the unit. Object
management has different characteristics so in the process by which management also appear
these complex issues at varying degrees. Management objectives of the unit are following a
management process to measure and quantify the results that the unit must be oriented in a
certain period of time.
The whole process of management includes two main stages: the directions stage and
implementation stage of the directions given. At each stage, control functions are important as
it's always showed the actual level of management. To achieve the proposed plan,
implementation process should be respected in the whole process of management.
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Organization made here including from the application of these guidelines, the order has been
oriented to the efficient use of resources available. In this stage the manager must use the
skills of their executive to manage, direct and coordinate all the departments. Completed
results are reported and compared with the objectives set out in the plan. From these results,
managers can examine, evaluate and adjust activities as appropriate to achieve objectives in a
better way.

At the directions stage, should be oriented forecasts and target resources, at the same
time check all information about resources and objectives, develop programs and plans. . .
After the plan has been under control, we can give specific decisions.
At the implementation stage of the directions, need to combine the resources under
optimal, regular inspection and control process and results of the process to reconcile the
relationship, adjusting entries criteria to achieve optimum results.
Thus, controlling is monitoring activities to ensure that these activities be carried out as
planned. This process includes three different steps: measuring the performance, comparing
actual results with a certain standard and take action to modify incorrect or inconsistent
standards. An effective control system is to ensure that all operations are completed in order to
achieve the objectives of the organization.
Under this definition, control is not a phase or a stage of process management but it is
implemented at all stages of the management process. Thus control can be understood as a
function of management. However this feature is also displayed very different depending on
the economic mechanisms and management level, on specific types of activities, the cultural
tradition as well as socio-economic conditions of each place in each specific historical period.
In general, control can be classified into direct control and overall control.
Direct control is the procedures; controlling regulations are built on the basis of
evaluation factors, the component management system. Direct control includes three basic
types: behavioral control, process control and protection control.
Behavioral control is the control of individual activities by employees and who perform
independent activities conducted. This is relatively effective measures to detect and prevent
fraud, mistake. An effective control system will help entire job to reduce.
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Process control is the capture and settlement of transactions or through our work which
transactions are recognized, allowed classifying, calculating, recording, synthesizing and
reporting. In cases, information is processed by computer systems; the control process is
implemented through function by computer.
Protection control is measures, control regulations to ensure the safety of property and

unit information. The key aims include:
Firstly: The division of responsibilities to protect asset, particularly allocation of
responsibilities with the responsibility to records of assets and restrict the access of people
with no direct responsibility for assets and records of unit without permission of the manager.
For example: To issue and implement regulations to control the inventory, the maintenance
regulation and repair of property and control of accounting document reference, data storage
in computers.
Secondly, the safety system: For example, warehouses, fire-proof safe, alarm system,
alarm, installs code to access information, etc. . . .
Thirdly, The stock- taking and certification by third parties:
Overall control is the overall control system for many systems, different jobs. In the
computerization of environmental management at high level, overall control functions of the
computer room. Want to review controls in this case must use the expert knowledge of
computers.
Thus, through theoretical research on the control of management, control can be seen as
a function of management, associated with management, where there is a management so that
is control. The more highly developed society, the greater manageable role, manageable
content is more complex, so management requires much more in control. However,
management and control functions in the management are complex so requiring not only
managers have sufficient knowledge and skills in industrial production but also be dynamic,
sensitive, understand the international situation to have suitable decisions on the subjects of
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management to achieve the target.
1.1.1.2. The concept of internal control system
In every business, monitoring- control role is important for management. This function
is carried out by internal control system of the business.
According to the International Federation of Accountants (IFAC): "Internal control
system is a system of policies and procedures to control:
+ Protect the assets of the unit, avoiding loss, drain or damage.

+ To ensure reliability of accounting information, avoid errors and fraud in the
recording, combining accounting document.
+ Ensure the implementation of the legal regime, ensure abidance with proper rules and
regulations relating to legal business activities of enterprises, and avoid the violation lead to
suspicious relations in financial operations.
+ To ensure effective operation and management capability. Avoid wastage of financial
resources and develop to maximize capacity of staff and the rank of management in the unit.
Accordingly, internal control is a function constantly of the units and organizations on
the basis of identified risks can occur in each stage of work to find preventive measures to
implement effective all objectives of the unit:
The first is the unit's assets must be protected. Property here can be invisible, visible,
can be material or immaterial. They can be stolen, misused different purposes or damaged if it
is not protected by the compatible control systems.
Secondly, the information must be reliable. Information is important bases for the
establishment of management decision. So the information provided to ensure timeliness, the
accuracy and reliability about real situation of activities at the same time fully reflect
objectively the main contents of economic activity and financial.
Thirdly, ensure the performance of the legal regime. Internal control system designed to
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ensure decisions and legal regulations related to business activities of enterprises must observe
properly.
The fourth, Ensuring effective operation and management capability: The control
process of unit is designed to prevent unnecessary repetition, causing lead to waste in the
operation and inefficient use of resources. In addition, periodically managers usually review
results in business activity which is done by a monitoring mechanism of internal control
system enterprises to improve management and administration of enterprise.
Four goals are unified, but sometimes also in conflict with each other. Responsibility of
managers is to build an effective internal control system and harmonious combination of four goals.
Thus, the conclusion concept of internal control system as follows:

Internal control systems are all policies and procedures to control unit established to ensure
efficiency and effectiveness of the activities in the unit, ensuring compliance with regulations
and legal units laws of the State ensure the reliability of information and protection of assets of
the unit.
Policies and control procedures here apply to all activities of the unit. So extent of
internal control system in relative extensity, which covers all activities of an organization from
personnel to business, finance and accounting, from small parts as teams, departments to
larger organizations such as companies or corporations. . .
1.1.1.3. The purpose of the internal control system
Internal control system is primarily due to the construction of management unit to serve
their managing purpose. When setting up and operating an internal control system, business
managers always towards the goal line available. According to the definition of IFAC so the
propose of internal control system is pretty obvious. Combining the views of different
organizations, we can see the purpose of internal control system is shown on the following points:
The first is: Administrating and business management effectively Regulations as well as
control procedures must ensure the work is done quickly, efficiently, preventing unnecessary
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repetition of the operation, avoidance of waste in production processes lead to use resources
inefficiently.
Second, make sure the regulations and the management procedures are implemented
properly.
Managers often do business through their own decisions and managing rules. Internal
control system will control the level of efficiency all decisions implement in the process,
ensuring observing with procedures and formalities have been properly defined.
Third: To detect problems in time business to plan and implement countermeasures.
Activity in the market economy with fierce competition makes the inevitable difficulties
and problems in the production process. Internal control system through its chain is
responsible for discovery of the difficulties and problems, from which the appropriate
countermeasures.

Fourth: to detect, prevent errors and fraud in business. Errors during production and
business activities are inevitable, unavoidable due to reasons both objective and subjective. All
stages in the operation were carried out by employees in units. They may have completely the
wrong committed, even fraudulent personal purposes. In order to detect and prevent errors and
frauds, we need to have internal control system with tight stages.
Fifth: We need to record accounting sufficiently, reliability and correct understanding of
the professional and business activities. The recognition of business activities through the
accounting work is not always complete and properly regulated. By setting the processes of
financial management accounting systems to provide data and reports, internal control system
will help to keep accounting records and financial statements to ensure compliance with
regulations.
Sixth: Protection of information assets from being abused or misused purposes.
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Property and business information are things that can be stolen, lost or abused. In the market
economy will be very dangerous if the information fall into the hands of competitors.
Therefore internal control system purpose is to protect assets and information through its
control process and limit the maximum losses for the unit.
1.1.1.4. The components of the system of internal control
In the opinion of IFAC as well as the Association's Certified Public Accountants USA
(AICPA), Internal control system includes 3 basic components: control environment,
economics information systems and control procedures.
Control Environment includes all the elements which are environmental temperament
impact the design of policies; affect all control operations as well as the effectiveness of those
policies in the unit.
These factors are mainly related to the attitudes, perceptions and actions of the
management unit. So we have a very important role in internal control system units. These
factors are environmental characteristics, it often includes:
First is: Characterized management
Specific management is proved by perceptions, attitudes of managers in operating

activities of the unit.
These views directly influence to the policies, regulations as well as well as inspection
and control in units. Some managers, who attach much importance to profits, emphasizing the
completion of the profitable plan, always ready take risks to achieve goals. In contrast some
other managers are very conservative attitude and cautious, afraid of risk and therefore may
miss opportunity in business. These different views of executive management lead to
differences in formulation and application of policies and control procedures.
Specific management is also proved by the power structure or power distribution in unit.
In some units, the management was centralized and dominated by an individual. In this case,
quality and capacity of centralized power has greatly influenced policies and control
procedures. By contrast, in some units, power is distributed to many people in the
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management organization. There are important issues using the power of those who have right
by using the proper rights assigned, to prevent abuse of this power.
Second, the organizational structure
In fact the organizational structure of a unit is the division of powers between the
members of the unit. A rational organizational structure will ensure that the units operate
smoothly and efficiently, able to prevent the violation, eliminate the inappropriate activity may
lead to errors, frauds. In contrast to the lack of logical structure will lead to wasteful
duplication or omission or negligence irresponsible, since it likely violations. Thus the
organizational structure itself of the units also greatly influenced to policies and control
procedures in the unit.
Third: Personnel policies
Personnel policies include all policies and regimes of the units for the recruitment,
evaluation, promotion and discipline reward employees. The recruitment, training and staff,
promote the appropriate personnel with professional qualifications, ethical qualities at the
same time succession and continuity considered a suitable personnel policy. People always
play a decisive role in the management process, thus personnel policies have a significant
effect to implement policies and procedures for control of the unit. All policies, procedures

correctly is also not effective when personnel unit at level weaknesses, moral degradation and
decline in morale. Conversely an effective human resource policy will make policies, control
procedures are observed seriously, limited to the minimum errors.
Fourth: The Plan
Including a system of plans and estimates as production planning, sales planning,
financial planning and projects, strategic plans of highest management part, the plan will help
operating unit’s right direction and efficiency. Periodically, Units compare real achievement
with target in plan, since than we have measures adjustment timely. So if plan work is carried
out seriously and scientifically, it will become effective control tool. In addition, it help unit to
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detect, prevent errors, frauds in the production activities of its business.
Fifth: Internal Audit part
Internal audit part provides supervision and regular evaluation of all activities of the
unit. So it is a factor of environmental control. An effective internal audit will help units get
timely information about operating status in general, control quality in particular, so that
adjustment, additional procedures, suitable controls rules more efficient. However, only
internal control part can promote efficiently when it is directly under the top management is
enough not limit the scope of its activities. Besides, it must be given relatively strong powers
to ensure the relative independence of internal audit part with parts to be examined. In
addition, internal audit department must have staffs that have enough sufficient capacity and
qualifications to perform their duties.
The sixth: Control Committee
Control Committee typically range from 3 to 5 members of the board play the role of
operational supervision of the unit from the observance of national laws to the specific task of
internal control in units. These members usually are not officers or employees of the unit to
ensure objective independent. The independence and effectiveness of the Committee is all of
important factor in environmental control.
The seventh: external factors
Excluding these factors mentioned above, environmental control still consist external

factors. These factors beyond the control of unit managers, but it have great influence to the
attitudes, behaviors of management and regulation, specific control procedures. Group factors
are generally: the impact of State agencies (tax, customs, financial, statistical, treasury ),
creditors and relative liabilities.
The accounting system and economic information mainly accounting system of units
include accounting voucher system, accounting system, accounts systems, balance sheet.
Through observation and comparison, calculate and record the arising economic operations,
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accounting systems not only provide necessary information for the management but also
control many aspects of the operation unit. By recording all import-export events of assets
based on the valid document so accounting help protect assets of units, avoid fraud or wasteful
use. Accounting also performs pre-surveillance activities in many areas such as supply units,
production or consumption by recording, calculation and analysis of business results for
each period. An effective accounting system must ensure effective implementation of
controlling target such as the truth, suitable approval, sufficiency, the evaluation calculation
exactly, timeliness. The accounting system is an important element in the system of internal
control units, which are demonstrated through control of accounting systems.
Accounting system is the system used for recording, calculating sort, transferred to the
general ledger, combine all of accounting event arise. The accounting system of the unit
includes four elements: Accounting record system, accounts system, account book system and
accounting report system.
Accounting record system includes compelling accounting document system and guide
accounting document system. It was established to record economic operations arising as a
legal basis for the figures on the account, accounting and accounting reports.
Accounts system is an important component of the accounting system of enterprises.
This system includes an account-level and second level to reflect the economic activities
arising which belong economic typology and other economic sectors in accordance with the
requirements and characteristics of market economy in our country today. Account book
system including a lot of kinds, a detailed accounting, general accounting, book structure, the

relationship test for comparison between the accounting, order and recording methods as well
as synthesizing data for reporting. Such accounting system is used for recording, systematizing
and synthesizing data from the accounting documents as a sequence and recording method
certainly.
The accounting report system reflects a general, comprehensive situation assets,
liabilities, capital, situation and result from business of units in a public accounting.
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Through observation and comparison, calculate and record the arising economic
operations, accounting systems not only provide information for management but also control
many aspects of unit operations. Therefore, the accounting system is a chain, an important
component of internal control system.
The Control of the accounting system is demonstrated through three phases of the
accounting process that is: Make the accounting record, account books reflect on (including
ledger and subsidiary ledger accounts) and set accounting reports.
Prepare accounting records is the first stage of accounting data processing. This is a very
important stage, the preparation of the full document, valid, legal and faithfully reflects all the
operations arising new accounting data to ensure the accuracy and reliability. Through the
period set up document, accounting can check, detect and prevent errors in the operations
arising, asset protection, and use of resources of the unit efficaciously. Reflected in accounting
books are the main stages in accounting data processing. Here all operations arising will be
recorded, computing classified, synthesizing into the accounting books. Accounting books
system is a very important role in internal control system. The book details on materials and
goods, debts . . . will help managers collect reliable information for making decisions on
operating units. In addition, accounting also helps to synthesize, store information science and
systems, are intermediate between the original documents and accounting reporting systems,
so it is the basis for inspection and compare documents. Prepare accounting reports is the final
stage of the process accounting information in order to assemble data on the accounting books
of the indices on accounting reports. Information shown on the accounting reports are not
simply carried over from the accounting books that it must faithfully reflect the financial

situation and results of operations of the units must be presented simultaneously in accordance
with accounting standards and related regulations.
Internal control procedures are the way, the operation in management procedures. To
achieve the control objectives, managers must establish and maintain the steps as well as how
to control the unit. They are designed depending on the characteristics of each unit. Therefore,
the steps to control and how to control can differ, even very different between types of units
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and operations.
The control procedures are built in accordance with basic principles as follows:
The first: Assignment principles
By this rule, authority and responsibility should be distributed to many parts or many
different divisions within an organization. Its purpose is to not have a personal or department
will be made a whole business process from beginning to end stages. The basis of this
principle is a lot of people do the same as a job. It is easy to detect errors and fraud more
difficult to occur. The assignment shall also have the effect makes the specialization, creating
mechanisms for inspection, boosting each other at work.
Second, the principle of concurrent
This principle requires the separation of powers and responsibilities for certain tasks as
the responsibility to carry out the responsibilities records; responsibility to preserve properties
with responsibility accounting entries; Accountability responsibility of approving the record
books, the accounting function with functional finance function to perform control functions,
etc This principle derives from the special relationship between the concurrent
responsibility easily lead to fraud difficult to detect. Even some responsibility not only or no
longer required but not concurrently with another family. For example, accounting work part-
time cashier can lead to embezzle public funds and amending accounting data to mask the
deficit; Storekeeper accounting work part-time warehouse easily lead to errors and fraud in
data import, export or stock.
Third: Principles of authorization and approval
According to this principle, the management unit can not solve all of the work in the

service unit which must be authorized to grant under management on behalf of the unit
decided to work in a certain range. However, the unit manager is responsible for that job and
still maintains a specific inspection. Authorization process is to continue to implement the
lower levels to create a system of divided responsibilities and powers between different levels
but to ensure the focus of the unit. Ratification is a manifestation of the specific decisions and
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to solve a task within the assigned powers.
Principles for authorization and approval of business requirements arise are authorized
to approve the staff appropriately.
Besides the above basic principles, the control procedures also include provisions
vouchers must be full of books, material and process control over the assets and records and
independent control of the implementation of activities of the units.
1.1.2. The role and position of the internal control system for the management of
enterprises
1.1.2.1. The necessity and benefits of the internal control system
In any organization, unity and common conflicts of interest - the interests of private
employers with laborers always exist together. If no system of internal control, how the
workers are not their own interests that do the damage to the common interests of all
organizations of the employers? How do I manage risks? How can decentralization, proxy,
assigning subordinates too accurately, scientifically.
An internal control system will bring strong organizational benefits such as: Reduce the
risk of potential risks in the business (errors inadvertently cause damage, slow the risk of the
plan, increased cost, and reduced product quality ). Protect property from damage, loss by
loss, fraud, cheat, steal. Ensure accuracy of accounting data and financial statements. Ensure
all members comply with rules, regulations and operating procedures of the organization as
well as the provisions of the law. Ensure efficient organization and operation, optimal use of
resources and achieve the set objectives. Protect the interests of investors, shareholders and
build confidence in them (cases JSC).
1.1.2.2. The role and position of the internal control system for the management of enterprises

As we all know, managing is the impact of organized, oriented of the management
subject to the management object with the aim to effective use of resources identified
effectively. The impact depends greatly on management tools as well as the organization's
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Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
process management leaders. To be a management unit, a business, managers must have their
tools at the same time make the order, the steps to control the activities of the unit. All the
policies, rules, regulations and other procedures designed to control the operations of the unit
back sides of internal control system.
Thus, we can say internal control system is very important role in the management of the
business. To manage the business, should have internal control system. Where there is no
internal control, there are no managers with full meaning of this notion.
A strong internal control system helps enterprises reduce risk, fraud or theft by third
parties or employees causing the company to ensure reliability of accounting data and
financial statements, to avoid the risk of human error may harm the company. In such
conditions, failure to comply with policies and business processes of the company also
reduced at the same time contribute to improving business efficiency across the enterprise.
In summary, effective internal control system will help manager’s better operating activities in
the unit. Conversely a poor performance internal control system makes the operating
difficulties, the manager can not control the activities occurring in the enterprise, and of course
this will affect directly to results production and business activities of enterprises. Therefore,
internal control system in enterprises occupies a very important and vital for the management
of the business.
With the role and position as such, increasingly internal control system is more and more
interested in the enterprise management attention. In developed countries have high level
management, internal control system it very seriously. In a company or a corporation, internal
control system be built in a scientific way is the key to success in management. When the
scale was extended enterprise, object management become more complex as the internal
control system affirmed the necessity of it. In Vietnam, since the switch to market economy
socialist orientation, many businesses have recognized the role of internal control system.

Leaders of businesses, large companies have the sense to build an effective internal control
system in their units. Awareness of the general managers, business leaders in particular on the
role and position of internal control system has shifted toward the positive. From here will
lead to substantial improvement in the management run by the role and position of internal
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Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
control system confirmed and recorded.
1.2. CHARACTERISTICS OF INTERNAL CONTROL SYSTEM IN HOA HUNG
TRADING AND INVESTMENT JOINT STOCK COMPANY
1.2.1. The objective of internal control systems in Hoa Hung trading and investment joint
stock company
The first, ensure that all of enterprises must to observe the laws of the State, the
command, rules and regulations of each enterprise. Prevent the phenomenon of violation or
non compliance, the business processes and techniques.
Second, ensure that the activities of each enterprise to be deployed right direction, the
resources are used efficiently, the organize measures implement in accordance with
appropriate procedures, effectively.
Thirdly, safeguard all assets in each business, equipment and technical coefficients used
well, enhance and ready fulfill all tasks assigned.
Fourth, organize information system in each particular enterprise accounting system and
economic information. The information system is best served for decision making at all levels
of management in all cases.
Fifth, through the control of unreasonable discovery in stages, from which
recommendations to the competent authorities, the authorities amended, supplemented or issued
new regulations aimed at strengthening better management, strengthen measures to ensure the
safety of property, weapons and equipment, improve operational efficiency in all areas.
1.2.2. Characteristics of the internal control system in Hoa Hung trading and investment
joint stock company
A noticeable feature is Hoa Hung trading and investment joint stock company operations
not fully comply with the rules of market economy. The success of Hoa Hung trading and

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Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
investment joint stock company is not only measured by business performance and economic
norms, but also also depends on the assigned plan. Therefore, the focus of the internal control
system in Hoa Hung trading and investment joint stock company is not only strictly controlled
to minimize costs and maximize profits but also generally considered structures, the the
activities to be better able to complete the specific tasks of a firm.
Environment characterized by such activities should be implementing internal control
systems in Hoa Hung trading and investment joint stock company is difficult, especially
when the implementation of the orders have been delivered to the effects certain internal
control policies of the business. Therefore, a change in policy to make the system of internal
control of Hoa Hung trading and investment joint stock company becomes more flexible and
can adapt to suit the situation and create conditions for civil servants and defense workers
conditions adapted to the conditions of production and other workers. On the other hand, the
change in this policy requires management costs as well as implementation costs and requires
large businesses to have time to adjust to new conditions and circumstances. It can be seen as
challenge for Hoa Hung trading and investment joint stock company.
Therefore, the internal control in a scientific way periodically, and make regular
continuity is essential. In parallel, Hoa Hung trading and investment joint stock comapy
must also improving internal control is a really proactive flexibility to be able to fulfill the
requirements that the Defense Department launched.
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Name: NGUYEN HUYEN TRANG Class: M2(09-10) financial and cotroling
Chapter 2
THE STATE OF INTERNAL CONTROL SYSTEM OF HOA HUNG
TRADING AND INVESTMENT JOINT STOCK COMPANY
2.1. CHARACTERISTICS OF ORGANIZATIONS AND ACTIVITIVES OF HOA
HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY WITH
INTERNAL CONTROL PROBLEMS
2.1.1. The formation and development of Hoa Hung trading and investment joint stock

Company with internal control problems
Hoa Hung Trading and Investment Joint Stock Company was established under Decision
No. 09/QD - QP dated 09/01/1990 of the financial and operating under the regime of
independent accounting, have legal status, using seal for economic transactions.
Starting from 1990 from a small workshop specializing in the sale of tables and chairs
for rural students and suburban of Hanoi, operated by Mr Doan Nguyen Duc. Until now, Hoa
Hung trading and investment joint stock Company has achieved strong progress and become
private corporations operating in many different fields. The representative office was
established in some provinces in order to facilitate customers can access and transactions with
a convenient and quick. In addition to maintaining and expanding export markets, Hoa Hung
is developing in domestic market, produce and supply all kinds of terrain data for the national
defense and security, combined with the defense on the economy range of domestic and
international.
In recent years, Hoa Hung trading and investment joint stock Company has developed
rapidly. Here are some indicators of economic, financial companies gained in the last 5 years:
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